Target Surges While Macy's Flops

Good morning. It’s August 21st, and today we are seeing big moves in retail, with Walmart’s stake sale in JD.com, Target’s 12% surge, and Macy’s stock tanking.

Previous Close 📈

U.S. stocks declined yesterday after being in the green for multiple days. This follows the worldwide sell-off on August 5th due to an interest rate hike from the Bank of Japan.

Futures

Futures are up today as investors look forward to minutes from the Federal Reserve’s latest policy meeting. These minutes will help them assess the probability of a rate cut in September.

What to Watch

In the premarket session, TJX Companies and Analog Devices will share their quarterly earnings.

Keep an eye on the minutes of the Fed's July FOMC meeting, which will be released at 2:00 p.m.

Tech firms Synopsys, Snowflake, Agilent Technologies, and Zoom Video Communications will share their earnings after the closing bell.

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Retail

Walmart’s $3.6 Billion JD.com Stake Sale Spurs Chinese Tech Stock Decline

Walmart Inc. has raised approximately $3.6 billion by selling its stake in Chinese e-commerce giant JD.com Inc., marking the end of an eight-year partnership.

The U.S. retailer sold 144.5 million shares at $24.95 each, reflecting an 11% discount to the previous day's close. This move has led to a significant decline in JD.com’s Hong Kong-listed shares, which fell as much as 12%, and sparked a broader selloff in Chinese tech stocks.

Walmart’s stock is up by about 1% in premarket trade today.

The sale is part of Walmart’s strategy to refine its operations in China, where it is focusing on expanding its successful Sam’s Club and hypermarket businesses.

Despite JD.com’s initial promise, the e-commerce firm has struggled alongside major rivals like Alibaba and PDD Holdings amid a challenging economic landscape in China.

Walmart’s decision to divest from JD.com follows a trend of dissolving partnerships between online and offline retail companies in China, as the envisioned seamless integration of physical and digital consumer experiences has not materialized.

The capital from the sale is expected to be reinvested into Walmart’s own retail operations in China, particularly its Sam’s Club franchise, which has shown resilience in a tough market.

Retail

Target Reports Strong Q2, Raising Profit Forecast But Remaining Cautious on Sales

Target reported better-than-expected earnings and revenue for its fiscal second quarter, driven by a 3% growth in sales. The company’s earnings per share came in at $2.57, surpassing Wall Street’s expectation of $2.18, while revenue reached $25.45 billion, also beating the anticipated $25.21 billion.

The stock is trading 12% higher than yesterday’s close before the opening bell.

The solid performance marks a return to growth after several quarters of sluggish sales and reduced profits, with net income jumping over 40% year-over-year to $1.19 billion. Despite these positive results, Target has indicated caution about the year ahead, maintaining a conservative full-year sales forecast.

The company expects comparable sales to range from flat to a 2% increase, with the most likely outcome being in the lower half of that range. However, Target has raised its profit guidance, now forecasting adjusted earnings per share of $9 to $9.70, up from the previous range of $8.60 to $9.60.

The company’s digital sales were a significant contributor, growing 8.7% in the quarter, as more customers utilized same-day services like curbside pickup and home delivery. Target also saw a modest rise in comparable store sales and a 3% increase in customer traffic, although the average basket size declined slightly.

Retail

Macy’s Tanks Amid Weaker Sales and Lowered Forecast for the Year

Macy's has returned to profitability in its second quarter, posting a net income of $150 million, or 53 cents per share, surpassing Wall Street expectations of 30 cents per share.

This marks a significant turnaround from the $22 million loss in the same period last year. Despite the profit rebound, Macy's faced a nearly 4% decline in sales, with revenue falling to $4.94 billion, below analysts' projections of $5.06 billion.

The stock is trading at nearly 9% below the previous close in premarket trade.

The sales decline is reflecting cautious spending behavior from inflation-weary consumers, who are increasingly focused on essential purchases. Comparable sales, which include online channels and established stores, fell 3.3%—worse than the previous quarter's 0.3% drop.

Macy’s stores experienced a 3.6% decline in comparable sales, while Bloomingdale’s saw a 1.4% decrease. However, Bluemercury, Macy’s luxury cosmetics chain, saw a 2% increase in same-store sales.

In response to the challenging retail environment, Macy's has revised its annual sales forecast downward, now expecting net sales between $22.1 billion and $22.4 billion, lower than the previous forecast of $22.3 billion to $22.9 billion.

The company is also anticipating a 2% to 0.5% decline in comparable sales for the year, a more pessimistic outlook compared to earlier projections.

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Stronghold Digital Mining, Inc. [SDIG] - Last Close: $2.93

Stronghold Digital Mining's stock is surging by nearly 58% in premarket trade.

Bitfarms has agreed to acquire the company in a stock-for-stock merger valued at approximately $125 million, plus the assumption of $50 million in debt.

This acquisition significantly enhances Bitfarms' energy portfolio and mining capacity, adding 4.0 EH/s to its hashrate with potential expansion to over 10 EH/s.

The merger also brings Stronghold's environmentally beneficial power generation assets into Bitfarms' operations, aligning with the company's strategic goals.

The acquisition provides Stronghold shareholders with a 71% premium based on the 90-day average stock price, which has fueled investor excitement and driven the stock's premarket surge.

ANEW Medical, Inc. [WENA] - Last Close: $1.03

ANEW Medical is rallying by 35% so far in premarket trading.

The company announced an exclusive worldwide license agreement with Transfertech Sherbrooke (TTS) for Nanoject, a needle-free, dry powder autoinjector for medicines and vaccines.

This will address the widespread issue of needle phobia and the limitations of current alternatives, offering a novel, painless, and cost-effective solution for drug delivery.

The deal positions ANEW to capitalize on a large market need, generate potential near-term revenue, and drive investor optimism.

BigBear.AI Holdings, Inc. [BBAI] - Last Close: $1.33

BigBear.AI's stock is surging by 27% in premarket.

The firm announced yesterday that it was awarded a share of a significant contract with the U.S. Federal Aviation Administration (FAA) as a subcontractor to Concept Solutions.

This multiple-award IDIQ (Indefinite Delivery, Indefinite Quantity) contract has a shared ceiling of $2.4 billion over ten years, allowing the FAA to procure a wide range of IT solutions and emerging technologies.

The contract is expected to bring substantial business opportunities and revenue potential, leading to a surge in its stock price.

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Everything Else

• The Obamas rallied support for Kamala Harris at the Democratic National Convention.

• Global impact is felt as China’s steel industry struggles with oversupply and falling prices.

• Shein takes legal action against Temu, alleging massive copyright infringement and fraud.

• The U.K. competition authority ends its Apple and Google App Store investigations.

• Emerging markets are stumbling as tech sector and China concerns spark a sell-off.

• Canadian banks are expected to set aside CAD$4.5 billion for bad loans amid economic challenges.

• A NY Fed survey shows Americans' job fears and searches are at the highest levels in a decade.

That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.

Best Regards,

— Adam Garcia
Elite Trade Club

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